Culture and Ethics in

International Business

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What is Culture?

Culture is that complex whole which includes

knowledge, belief, art, morals, law, custom, and other
capabilities acquired by man as a member of society.
- Edward Tylor

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What is Culture?

A system of values and norms that are shared among a

group of people and that when taken together
constitute a design for living.
- Hofstede, Namenwirth, and Weber

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Culture, Society, and the

Nation State
A society is a group of people bound together by a
common culture
There is not a strict one-to-one correspondence
between a society and a nation state
Nation State:
- Is a political creation
- May contain a single culture or several cultures

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The Determinants of Culture

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Social Structure

Social structure refers to its basic social organization

Two dimensions that are particularly important
include:
- The extent to which society is group or individually oriented
- Degree of stratification into castes or classes

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Religious and Ethical Systems

Religion: a system of shared beliefs and rituals that are

concerned with the realm of the sacred
Ethical systems: a set of moral principles, or values, that are
used to guide and shape behavior
- Most of the worlds ethical systems are the product of religions

Among the thousands of religions in the world today, four

dominate in terms of numbers of adherents:
-

Christianity with 1.7 billion adherents

Islam with 1 billion adherents
Hinduism with 750 million adherents
Buddhism with 350 million adherents

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Language

Spoken
- Verbal cues
- Language structures perception of world

Unspoken
- Body language
- Personal space

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Education

Formal education plays a key role in a society

- Formal education: the medium through which individuals learn

many of the language, conceptual, and mathematical skills that
are indispensable in a modern society
- Also supplements the familys role in socializing the young into
the values and norms of a society
- Schools teach basic facts about the social and political nature of a
society, as well as focusing on the fundamental obligations of
citizenship
- Cultural norms are also taught indirectly at school
Examples include: respect for others, obedience to authority,
honesty, neatness, being on time
Part of the hidden curriculum

- The use of a grading system also teaches children the value of

personal achievement and competition
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Culture in the Workplace

Four dimensions of culture

- Power distance - cultures are ranked high or low on this
dimension based on the particular societys ability to deal with
inequalities
- Individualism versus collectivism - this dimension focuses on
the relationship between the individual and his/her fellows within
a culture
- Uncertainty avoidance - this dimension measures the extent to
which a culture socializes its members into accepting ambiguous
situations and tolerating uncertainty
- Masculinity versus femininity - this dimension looks at the
relationship between gender and work roles
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Problems with Hofstede

Assumes one-to-one relationship between culture and

the nation state
Research may have been culturally bound
Survey respondents were from a single industry
(computer) and a single company (IBM)
https://www.youtube.com/watch?v=6gJzRS0I7tA

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Ethics in Global Business

Business ethics are the accepted principles of right

or wrong governing the conduct of business people
An ethical strategy is a strategy or course of action
that does not violate these accepted principles

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Ethical Issues in
International Business
Many of the ethical issues and dilemmas in international
business are rooted in the fact that political systems, law,
economic development, and culture vary significantly from
nation to nation
In the international business setting, the most common ethical
issues involve
-

Employment practices
Human rights
Environmental regulations
Corruption
Moral obligation of multinational corporations

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Employment Practices

Ethical issues associated with employment practices

abroad include
- When work conditions in a host nation are clearly inferior to those
in a multinationals home nation, what standards should be
applied?
- While few would suggest that pay and work conditions should be
the same across nations, how much divergence is acceptable?

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Human Rights
Questions of human rights can arise in international business
because basic human rights still are not respected in many
nations
- Rights that we take for granted in developed nations, such as
freedom of association, freedom of speech, freedom of assembly,
freedom of movement, and freedom from political repression are
by no means universally accepted

The question that must be asked of firms operating

internationally is: What is the responsibility of a foreign
multinational when operating in a country where basic human
rights are trampled on?
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Environmental Pollution

Ethical issues arise when environmental regulations in host

nations are far inferior to those in the home nation
- Developing nations often lack environmental regulations, and
according to critics, the result can be higher levels of pollution
from the operations of multinationals than would be allowed at
home

Environmental questions take on added importance because

some parts of the environment are a public good that no one
owns, but anyone can despoil
- The tragedy of the commons occurs when a resource held in
common by all, but owned by no one, is overused by individuals,
resulting in its degradation

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Corruption
Corruption has been a problem in almost every society in history, and
it continues to be one today
International businesses can, and have, gained economic advantages
by making payments to government officials
The United States passed the Foreign Corrupt Practices Act to fight
corruption
- Outlawed the paying of bribes to foreign government officials to gain business

In 1997, the trade and finance ministers from the member states of the
Organization for Economic Cooperation and Development (OECD)
followed the U.S. lead and adopted the Convention on Combating
Bribery of Foreign Public Officials in International Business
Transactions
- Obliges member states to make the bribery of foreign public officials a criminal
offense
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Moral Obligations
Multinational corporations have power that comes from their
control over resources and their ability to move production
from country to country
Moral philosophers argue that with power comes the social
responsibility for corporations to give something back to the
societies that enable them to prosper and grow
- Social responsibility refers to the idea that businesspeople
should consider the social consequences of economic actions
when making business decisions
- Advocates of this approach argue that businesses need to
recognize their noblesse oblige (benevolent behavior that is the
responsibility of successful enterprises)

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Ethical Dilemmas

Managers must confront very real ethical dilemmas

- The ethical obligations of a multinational corporation toward
employment conditions, human rights, corruption,
environmental pollution, and the use of power are not
always clear cut
- Ethical dilemmas are situations in which none of the
available alternatives seems ethically acceptable

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The Roots of
Unethical Behavior
Why do managers behave in a manner that is unethical?
- Business ethics are not divorced from personal ethics
- Businesspeople sometimes do not realize they are behaving
unethical because they fail to ask if the decision is ethical
- The climate in some businesses does not encourage people to
think through the ethical consequences of business decisions
- Pressure from the parent company to meet unrealistic
performance goals that can be attained only by cutting corners or
acting in an unethical manner
- Leaders help to establish the culture of an organization and they
set the example that others follow

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4 - 22

The Roots of
Unethical Behavior

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Philosophical
Approaches to Ethics: Straw Man
Straw man approaches to business ethics are raised by
business ethics scholars primarily to demonstrate that
they offer inappropriate guidelines for ethical decision
making in a multinational enterprise
- The Friedman Doctrine states that the only social
responsibility of business is to increase profits, so long as
the company stays within the rules of law

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Philosophical
Approaches to Ethics: Straw Man
Cultural Relativism believes that ethics are nothing
more than the reflection of a culture (When in Rome,
do as the Romans)
The Righteous Moralist claims that a multinationals
home-country standards of ethics are the appropriate
ones in all countries
The Nave Immoralist asserts that if a manager sees
that firms from other nations are not following ethical
norms in a host country then they should not either
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Philosophical Approaches to Ethics:

Utilitarian and Kantian Ethics
Utilitarian approaches to ethics hold that the moral
worth of actions or practices is determined by their
consequences
- An action is judged to be desirable if it leads to the best
possible balance of good consequences over bad
consequences
- One problem with utilitarianism is in measuring the benefits,
costs, and risks of an action
- The second problem related to utilitarianism is that it does
not consider justice, so the minority will always be at a
disadvantage
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Philosophical Approaches to Ethics:

Utilitarian and Kantian Ethics
Kantian ethics hold that people should be treated as
ends and never purely as means to the ends of others
- People are not instruments like a machine
- People have dignity and need to be respected
- Kantian ethics are viewed as incomplete

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Philosophical Approaches to Ethics:

Rights
Rights theories recognize that human beings have
fundamental rights and privileges which transcend
national boundaries and cultures
Rights establish a minimum level of morally
acceptable behavior
Moral theorists argue that fundamental human rights
form the basis for the moral compass that managers
should navigate by when making decisions which
have an ethical component
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Philosophical Approaches to Ethics:

Rights
The notion that there are fundamental rights that transcend
national borders and cultures was the underlying
motivation for the United Nations Universal Declaration
of Human Rights
- All human beings are born free and equal in dignity and
rights
- They are endowed with reason and conscience and should
act toward one another in a spirit of brotherhood
- Everyone has the right to work, to free choice of
employment, to just and favorable conditions of work, and
to protection against unemployment
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Philosophical Approaches to Ethics:

Rights
United Nations Universal Declaration of Human
Rights
- Everyone, without any discrimination, has the right to equal
pay for equal work
- Everyone who works has the right to just and favorable
remuneration ensuring for himself and his family an
existence worthy of human dignity, and supplemented, if
necessary, by other means of social protection
- Everyone has the right to form and to join trade unions for
the protection of his interests

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Decision-Making Process

Five-step process to think through ethical problems

1. Businesspeople should identify which stakeholders a decision
would affect and in what ways

Stakeholders are individuals or groups that have an interest, claim,

or stake in the company

2. Judge the ethics of the proposed strategic decision, given the

information gained in Step 1
3. Managers must establish moral intent
4. Implement the ethical behavior
5. Review the decision to make sure it was consistent with ethical
principles

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